If you have a car on finance, why?

[Cupboarddoorknob]

Genuinely curious and not a dig.
I’ve only ever owned three cars, my first car my parents bought for me was an old banger, then the other two I’ve bought myself one for £6k which I saved for and then ran it until I realised repairs were silly and sold it on for £3k to cut my losses, I used that £3k and a bit of savings to buy my now car which cost between £3 and £4k and seems to be doing well so far. DH has always bought his cars cash as well.
We have friends who have up to £1k a month going out for car payments, all the while they are stressing about their outgoings, not able to save, not living in poverty obviously but it strikes me as total madness to have this monthly expense on a depreciating asset, even if it does bring a level of enjoyment.

Because….

I have a large family and therefore need two large cars in the house.

I travel a Lot for work (long journeys) and need a reliable car that’s not going to break down.

I like nice things.

Large, nice and reliable cars are not for sale at £4-£6k and I like to invest my current savings elsewhere (where I get a return on investment !). Cars depreciate significantly… you’ll never get that money back you know. I see it as a cost of living my life.

🤷‍♀️

smug judgey post!

Think about it op….not everyone who finances their car is in a bad position financially! £20k car on finance at 4% interest, may allow someone to invest £20k elsewhere at 5% return! Consider the opportunity cost to what you could do with that money! You do the maths !

Because my parents have never bought me a car and I dont have savings to buy one outright.

I’ve been driving for 17 years and just got my first car on finance 18 months ago. I always had old bangers I bought outright and the last one they didn’t even complete the MOT before telling me to get rid, it was knackered. This time I didn’t any spare cash knocking about and I need one with business insurance for work so I was a bit stuck. I was able to borrow my mum and dad’s spare one for a few weeks while I shopped around as I decided if I was doing finance I was getting something I wanted with a few add ons. I managed to find a cracking little car that was everything I wanted and had only done 12k miles even though it’s a 67 reg. Ngl the monthly payments do sting a bit though! It’ll be mine after 5 years and should last me ages, I do run them into the ground lol.

That’s like asking why people rent a house instead of buying one.

Some people don’t have a lump sum up front to buy a car. Getting a loan to buy one or financing it directly are much the same, except paying back a loan for a shit car gives you a shit car at the end of it. Paying a finance agreement for a fancy car gives you nothing at the end, but if you can afford to keep paying that amount you get another brand new fancy car, no MOT, wear and tear to fix, often service plans included. If you expect an old car will cost you £500-1000 a year to fix stuff on (that’s certainly been my experience) then adding that to your monthly outgoings on top of say £200 a month on loan repayments could get you a much nicer and more reliable car for every day driving, instead of owning a still depreciating heap of junk! (I say this as someone currently running a £3k banger into the ground and considering a lease next time!)

Because we get very low interest deals and the interest on our investments is more. It’s a complete no brainer for us. Buying outright would be financially illiterate.

We ideally buy a car thats a year old (usually ford or vauxhall) and run it until it stops so then its worth scrap value. This time round we had to go for a car thats 4 years old as the prices are insane. Yes we still had to take a loan.

We are not car proud at all! My husband drives an old Golf and unfortunately I drive a WAV as my son uses a wheelchair.
We usually buy outright from our savings and they pay our savings back £300 a month. Generally paid off by time we need another vehicle. Even our WAV on Motability we needed a £15,000 upfront payment and you can keep the van for 5 years. We bought an ex Motability van for £20,000 and they took £5k part ex for our old van. Now the van is ours just for the deposit on Motability. We oay ourselves back £300 a month which is what we'd also be paying to Motability monthly!

Because I am not one of life's natural drivers, and to feel confident and safe carting my kids around, I feel best in a modern automatic that just works.

I have a 2020 Toyota Corolla hybrid that we got ex display. It's extremely reliable and easy to drive. We bought it on pcp and then took out a low interest bank loan to finance the balloon payment. We'll have paid about £200/£250 a month for eight years by the end of the loan term. The car has held its value quite well and if we did have to sell it now, we should get the outstanding amount on the loan plus a few grand.

We couldn't have afforded this car without finance and it's worth it to me.

Yes I borrowed money from my bank to purchase a second hand car, no I didn’t opt for the finance from the car showroom as that’s often extortionate. However, sometimes they throw in a lot of perks with the option to payback early, so you take it out, get the perks then use a cheaper loan to pay it off.

it is always a balance, £250 a month for a 4 year old car, not the car we wanted as we couldn’t afford it, but it’s nice and main thing is it’s safe for our children to travel down the motorway in. That was our priority.

£1000 a month on a car? Personally no, but if you can afford it carry on.

This sort of a question is pretty much a judgement disguised (badly) as curiosity. Why wouldn’t it occur to you that some people need finance in order to afford a car at all and some like a nice new shiny car with all the bells and whistles and like to upgrade every few years. It’s not rocket science.

Safety, comfort, stability, reliability.

I have a new car on lease. … probably one of the posh expensive ones you seem to despise!

I can. It’s comfortable. It’s safe, it suits the circumstances of where I live, what I use it for and what I earn!

over 3 years, I pay a fixed monthly sum, known to me from the start, for lease of the vehicle and roll in alll my services. The only additional costs are fuel, you can even include tyres if you want to.

I don’t have surprise high bills.

I have good customer service when it does need something. Include an AA/RAC option.

i’m driving the latest technology for safety and comfort and to fit my family in.

I pay about one third the price of the vehicle over 36 months, and then I return and have another new one. Known fixed costs, latest upgrades etc.

i could go and spend £50k on a car, and risk the depreciation and the maintenance costs, but why should I why a lease company is willing to do that? & I can keep the funds in my bank! &/or use them for other things.

I didn't have the big payment to spare for a car so bought a wee runaround on finance and it's paid off now. The car will do me a good few years or more to come. I cannot understand why people stretch themselves for a big fancy car they cannot afford though.

Never had a car on finance and never will. Ive always had what most would deem to be 'old bangers'. Paid £10k for a second hand car 10 years ago and was horrified at the cost, then paid over £40k for a nearly new car a few years ago. Will not be buying such an expensive car again, though it is very nice to have/drive and is environmentally friendly and cheap to power.

Because I got a 21-plate car in 2022 with one careful previous owner for £189 per month! (Partial trade-in with old car too).

Some people like having new expensive cars. And there is not a lot of difference between buying one for cash and it depreciating over 4 years before you sell it to upgrade or keeping your cash in the bank and financing one for 4 years.

We can afford our cars outright but it makes more financial sense to have them on finance. New cars lose so much value that if you spend 50k on a new car it’s lost 30% of its value after a year. We’d rather not use our own cash on an depreciating asset

But why not get an older / much cheaper car ?

Because not everyone wants an old car? I like to drive a new car and turn mine over every 3-4 years. I do via lease because where I am you can do it on a pre-tax basis and when my accountant runs the figures it makes sense. If I wanted to keep a car 10+ years then I don’t think it would make financial sense but that’s not what I want. As for the balloon at the end of the lease, I’ve always made a significant profit to pocket. I get cars with excellent resale value, turn it over to a reseller rather than selling it myself (free service provided by finance company), and walk away with a lovely chunk of money after the finance company gets their balloon payment as my sales have always been way above that.

Because everyone’s different and some people want a really nice car

My issue with lease is the mileage limit

??? I have never had a mileage limit on any of my leases?

ETA - up front they get you to estimate the mileage for fuel/servicing/tyre replacement costs for the life of the lease. If after 6 months you are doing significantly more or less than your initial estimate they ask if you would like to adjust so you are not short for fuel/servicing payments, or you don’t have too much extra sitting in your lease account if you are doing under.

Me either!

This is a classic personality thing. Some people look at the finance/logic of the decision (my husband does this and you're right, much better to buy a 2nd hand car for cash - it's the most sensible financial decision). However, lots of the people I know (me often too) don't just make decisions based on logic/money. If you want a nicer car and can't afford one, but can afford the monthly payments, then you can have what you want whilst you keep the payments up.
It's like saying "why buy a designer handbag" or "why go to the Maldives on your credit card, when there are beaches in europe" or "why buy a bigger house than you need with a high mortgage" - because people want to, prioritise their money that way, or overstretch themselves to have something they like/buy into the brand. If we all just did the most logical and sensibly financial thing, advertising wouldn't exist, marketing wouldn't be a thing, coffee shops wouldn't exist because an instant at home is cheaper, lots of shops, most designer brands, fancy cosmetics etc would all be gone. Instead, humans spend their money on £50 moisturiser, designer clothes, lease cars and Starbucks- we are not the most sensible of species really!

I lease a car I use for work and longer trips:

1. Because car benefit generally comes with rules about how old the car needs to be
2. Because i need a car that's super reliable or replaceable, cars less than 3 year old don’t tend to break down and if it does, getting a replacement is part of the deal
3. Because my work expects me to drive something that gives off "successful" vibes, even if I don't fully subscribe to that Bs, enough people at work do.

We have a 12 year old Toyota battered workhorse. Cost me £3k. Never stopped. Chugs on for ever, I'm willing to bet I'll still have it when I retire. Gives off "I don't give a flying f.." vibes 😂

People who say ‘we buy a car and run it into the ground’ also aren’t mentioning that before it’s ’in the ground’ it costs a significant amount in repairs/upkeep/maintenance/services/MOTs etc. With my lease car, that’s all included. And they pick it up and drop it back off if something needs doing.

This! Anyone with a bit of understanding of depreciation, interest rates and wants a nice comfortable car for long family trips that is also reliable, so price point above £20k, gets that

I definitely spend money on repairs but that's not even close to 1/3 of the year bill on leasing a car.